Consideration of pension changes in the budget in order to increase the workforce

The chancellor is understood to be considering increasing lifetime pension payments (LTA) in a move seen as an attempt to reverse the trend towards early retirement.

PA News understands Jeremy Hunt is considering allowing workers to put more money into their pension fund before tax as part of his budget package.

Mr Hunt wants to boost Britain’s workforce as he wants to deliver on the Prime Minister’s promise to grow Britain’s stagnant economy.

The lifetime allowance is currently £1.07m, meaning more people in a personal pension fund will pay tax once they reach this limit.

Reports differ on how much Mr Hunt could raise the LTA in his fiscal statement on Wednesday.

The Times said the chancellor would raise it to £1.8m, while the Daily Telegraph said it could be as high as £1.5m.

It is also understood that the annual pension benefit rate could rise in the Budget, with Mr Hunt instructing his advisers to calculate how much the change would cost the exchequer.

The Telegraph and The Times said the amount each person could save each year before tax could rise from £40,000 to £60,000.

Speaking to Bloomberg earlier this year, Mr Hunt promised to consider fiscal measures to help people over 50 who take early retirement during or after Covid-19 return to work.

In a speech in January, he said the employment rate was 300,000 lower than it was before the coronavirus pandemic.

Mr Hunt said: “So to those who have retired after the pandemic or haven’t found the right role after the holidays: Britain needs you.

“And we look at what’s needed to make it worth your while.”

The lifetime pension was first introduced in 2006, when it was set at £1.5m.

It rose to £1.8m by 2012 before being gradually reduced.

It was due to remain at £1.07m until 2026, but Mr Hunt could choose to make a change.

The British Medical Association (BMA) has called the current LTA rate “punitive” and has called for doctors to leave the profession.

The BMA said on its website: “High contribution rates, significant pay cuts and a punitive pension taxation system have not only resulted in a very high cost of scheme membership for senior doctors, but also reduced their pension benefits.

“This has led to many doctors taking early retirement or reducing their hours.”

In January, former pensions minister Baroness Altmann called on ministers to change “illogical” pension rules to help ease the workforce crisis in the NHS.

During a debate in the House of Lords, a Conservative peer said that “even middle-income earners” were finding their “tax-free pension contributions” “resulting in large tax claims that exceed their additional income”.

He said this meant that some doctors were “effectively paid to work for the NHS” and that the current system “incentivises people not to work”.

The Treasury said it would not comment on budget speculation.

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